When the IPO plan was filed last month, it enticed the public with its first opportunity to own a piece of the Art Deco landmark, which was appraised at $2.52 billion. It also stirred a sleeping beast: the building's dauntingly convoluted ownership structure, in which some 2,800 investors have a say in the deal. In previous decades, the 102-story tower has sparked battles involving Donald Trump, Leona Helmsley and others.Already, some owners say they are being shortchanged by the Malkins, a storied New York real-estate family that manages the building and is overseeing the IPO process. The protests could bog down or potentially even scuttle the deal.A lawsuit filed in New York state court Thursday alleges that the process is overly generous to the Malkins by granting them "excessive and unfair" compensation that lessens the amount available to other investors.A spokesman for the Malkins said in a statement: "This is a baseless lawsuit, and it goes without saying that we will vigorously oppose it." Under the proposed IPO plan, the building will be part of a new real-estate investment trust, called Empire State Realty Trust Inc., that will include 17 other Malkin properties in New York and Connecticut. The offering is expected to raise up to $1 billion, valuing the trust at around $4 billion.The two biggest owners—the Malkin family and the estate of Ms. Helmsley—would get stakes valued at $642 million and $1 billion, respectively, according to SEC filings.But allocating the proceeds could be another contentious chapter in the building's complicated financial history. "This cannot be defined as a fair shake for the investors who own the Empire State Building," says Richard Edelman, an investor who lives in the San Diego area and isn't a part of the lawsuit.Harry Helmsley and his partner Lawrence Wien bought control of the building in 1961 for $65 million from Chicago tycoon Henry Crown. They raised money for the deal by setting up a two-tier structure: One tier includes outside investors who bought partnership units at $10,000 each for a stake in the Empire State Building's 114-year lease, and the other has a sublease and is in charge of managing the property. The deal helped change the way property was sold by anticipating the use of limited partnerships in real-estate investing. It also set the stage for fights involving the heirs, outside investors and other parties—most notably Mr. Trump, who tried to take control of the building in a partnership with a Japanese billionaire in the 1990s.Mr. Wien's daughter married Peter Malkin, and their son, Anthony Malkin, is president of Malkin Holdings. Mr. Helmsley's wife, Leona, inherited her husband's stake in the building. She died in 2007 and left most of her holdings to a charitable trust.While the IPO is likely to appeal to investors eager to own a slice of real-estate history, the financial performance of the Empire State Building hasn't been stellar. The observatory deck and antenna are money generators, raking in about $65 million in profits in 2010, according to securities filings. But the 2010 occupancy rate was only 68%, as space was freed up and renovated for new tenants, and the rental space suffered a $15 million loss that year. More recent full-year data weren't available.Still, the stakes are high in structuring the IPO. Its opponents point out that SEC filings state that the appraiser hired by the Malkins didn't rely on a standard cash-flow analysis to determine how the value of the Empire State Building would be divided. A standard cash flow analysis would have resulted in a "significantly higher" allocation to the owners, according to the appraisal report.The lawsuit claims the Malkins would collect $328.5 million tied to their role as building manager, which some owners deem excessive. The suit also alleges that some of the other Malkin properties rolled into the new company "are in poor financial position and will threaten to drag down the financial performance."The lawsuit asks the court to halt any IPO process that isn't "fair and equitable." The IPO plan requires 80% of the 2,800 investors to approve it, though a vote isn't expected for months.The two sides are now rallying support. Julien Studley, an Empire State Building investor and New York real-estate broker, says Peter Malkin invited him to lunch a few weeks ago at Manhattan's Century Club, where they are both members. "He wanted to see where I was going on this," Mr. Studley says of the IPO and whether Mr. Studley was going to make any fuss. Mr. Studley says his conclusion is that some of the fees are "completely unjustified." A spokesman for Mr. Malkin declined to comment.Write to Craig Karmin at craig.karmin@wsj.comhttp://online.wsj.com/article/SB10001424052970204571404577257603127599654.html?mod=WSJ_NY_LEFTSecondStories#articleTabs%3Darticle